Construction Legislative Week in Review
www.agc.org August 4, 2011
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On the Inside
TAX
More than Half of the House Supports Efforts to Repeal 3 Percent Withholding
Financial Accounting Standards Board Finalizes Pension Disclosure Standard Update
CONGRESS
AGC's Initial Analysis of Debt Limit Legislation
AGC Leads Coalition to Fights Big Cuts to GSA New Construction and Lease Programs
TRANSPORTATION
FAA Shutdown Continues
No Action on Highway Reauthorization Gas Tax Renewal Could Be a Potential Problem
PAC
AGC PAC Shows Support in Nevada-2 Special Election, Monitors Oregon-1
TAX
More than Half of the House Supports Efforts to Repeal 3 Percent Withholding
 

As Congress heads into the August recess, 221 Cosponsors, more than half of the House supports the repeal of 3 percent withholding.  The Senate has 29 cosponsors, almost one third of Senators sponsoring repeal.  AGC members and the construction industry have been at the forefront of the repeal campaign. 


The most recent additions to the House cosponsor list are:


Rep Barletta, Lou [PA-11] - 7/28/2011
Rep Bartlett, Roscoe G. [MD-6] - 7/28/2011
Rep Eshoo, Anna G. [CA-14] - 7/28/2011
Rep Forbes, J. Randy [VA-4] - 7/29/2011
Rep Granger, Kay [TX-12] - 7/28/2011
Rep Guthrie, Brett [KY-2] - 7/28/2011
Rep Hall, Ralph M. [TX-4] - 7/28/2011
Rep Rivera, David [FL-25] - 7/28/2011


There are no new additions to the Senate cosponsor list this week.


AGC continues to ask its members to contact their elected officials, reach out to local stakeholders and state and local agencies; and these efforts have not gone unnoticed by Congress.  However, Congress has yet to schedule a debate on the bill so action cannot stop.  Use AGC’s 3 percent withholding website to find additional resources including talking points, IRS regulations, videos on the impact of this legislation, letters sent to Congress by AGC, and ways to become involved.  Please continue to make contact with your legislators and encourage your employees to do the same by using the Legislative Action Center.


For a list of cosponsors in your state, please click here.


For more information, please contact Karen Lapsevic at (202) 547-4733 or
lapsevick@agc.org. Return to Top

Financial Accounting Standards Board Finalizes Pension Disclosure Standard Update
 

The Financial Accounting Standards Board (FASB) announced on July 27, a new financial disclosure standard for multiemployer pension plans.  AGC is very proud of the successful, painstaking efforts by our Tax and Fiscal Affairs committee and the Construction Industry FASB Coalition in getting the most dangerous provisions of the originally proposed plan removed, including information about withdrawal liability and retiree health and welfare benefits (though the latter might be addressed in a future initiative).  For some background on this issue, click here.  To view FASB’s press release, click here.

For more information, contact Karen Lapsevic at 202-547-4733 or lapsevick@agc.org. Return to Top

CONGRESS
AGC's Initial Analysis of Debt Limit Legislation
 

After a long battle, Congress is heading home for the next four weeks to spend time in their district offices while meeting with constituents. AGC has gotten many questions about the debt deal which Congress passed this week. People ask, what does it mean for the economy? What will it do to taxes? What will it do to spending? Most importantly, what does it mean for construction?  It is still early, and the definitive impact of the legislation on taxes, spending and the economy is not yet fully understood.  Below is AGC’s initial impression on what the deal is, what it will do and what we might see over the next year and a half.

Was the debt limit increase needed?

The federal government has an obligation to pay its bills.  It should pay its outstanding obligations for domestic, military and international spending.  Congress should also account for the impact of tax breaks allowed by the Treasury.  The federal government decided how much it was going to spend in fiscal year 2011 when the president signed into law 112-110 the full year appropriations bill for FY 2011. The federal government has ongoing obligations to pay interest on debts, and to pay Social Security, Medicare and similar claims.  The federal government processes a significant number of payments each month; for example, 211 million payments were made in June.  They need a certain cash flow to cover those payments, similar to a contractor.  In August 2011 the federal government has $172 billion in expected revenue and $306 billion in scheduled payments of $306 billion.  The $134 billion shortfall requires the debt limit to be raised. 

What does the plan do?

The bill establishes a process more than anything else.  It creates a process for the release of debt limit increases, for the evaluation of federal spending priorities and for the imposition of across-the-board cuts if Congress fails to agree on priorities and fails to hit designated spending targets.   The legislation also calls for Congress to take a vote on a balanced budget amendment to the Constitution.

The plan would initially raise the debt ceiling by $900 billion. It also sets new budget caps that would cut almost $1 trillion from federal discretionary programs and second, it creates a special joint committee to cut another $1.2 trillion to $1.5 trillion from federal programs.  The amount of the debt limit increase will ultimately depend on the level of new deficit reduction measures that the Joint Select Committee on Deficit Reduction proposes.  The combined $2.1 trillion to $2.4 trillion increase in the debt limit would be enough to get the government through next year’s election without Congress and the president having to raise the debt ceiling again.

The legislation passed this week establishes new budget caps that will reduce federal spending by almost a trillion dollars over the next 10 years by requiring cuts of 4-11% annually over the next decade. These budget caps will apply to annual appropriations bills currently being considered in the House and Senate. The second round of budget cuts will start with the Joint Committee on Deficit Reduction, which will be a 12-member special congressional committee, made up of three Republicans and three Democrats from the House and Senate.   The Joint Committee will be appointed in the next two weeks, they have to hire a staff director and have to have their first meeting within 45 days. House and Senate Committees that want to make recommendations to the Joint Committee must do so by October 14.   The committee is tasked with writing a bill by November 23 that will, as mentioned above, reduce deficits by another $1.5 trillion over 10 years.  The House and Senate would then vote on the plan by December 23 without amending the committee’s recommendations.

If the Joint Committee does not meet their deadlines or their budget cutting targets, an additional $1.2 trillion in spending cuts would automatically go into effect.   This process, known as sequestration, would be imposed 15 days after Congress adjourns after failing to meet the targets, and would be equally divided between defense and non-defense programs.  Social Security, Medicaid and unemployment insurance programs would be exempted from automatic cuts.

An explanation of the Budget Control Act and the path forward for further deficit reduction is outlined in this flow chart.

What does it mean for spending?

The legislation would establish discretionary spending limits, subject to the sequestration process previously described.  The bill would set separate discretionary spending limits for security and non-security spending in FY 2012 and FY 2013.  From FY 2014 to FY 2021, discretionary spending limits would apply globally to all discretionary spending. Under the bill, security spending would include discretionary appropriations associated with agency budgets for the Department of Defense, the Department of Homeland Security, the Department of Veterans Affairs, the National Security Administration, the intelligence community management account, and all budget accounts for international affairs.

The bill would also prohibit the House and Senate from considering legislation that would increase spending beyond the discretionary limits in the bill, subject to a point of order.  According to the Congressional Budget Office (CBO), if appropriations are equal to the caps on discretionary spending, the bill will reduce budget deficits by $917 billion between 2012 and 2021.  In addition, legislation originating with the Joint Select Committee, or the automatic reduction in spending, would reduce deficits by at least $1.2 trillion over the same ten-year period,  making the total impact on deficit reduction at least $2.1 trillion from 2012 to2021.

What does it mean for taxes?

The immediate deficit reduction plan does not include or preclude tax increases. The additional deficit reduction could include tax increases, but only if 7 out of 12 members of a new joint committee of Congress agree to raise taxes, including at least one Republican member of the committee; and a majority of the House and Senate vote for the committee’s recommendations; and the president signs the bill into law.  Today House Speaker John Boehner (R-OH) said he does not plan to appoint anyone who will support a tax increase and Majority Leader Harry Reid (D-NV) said he does not plan to appoint anyone who will agree to a deficit reduction plan that does not include tax increases, marking the first disagreement of the joint committee before it is even constituted.

Impact on Construction

Construction programs have taken a disproportionate share of cuts in 2011 and are likely to be cut further in 2012.   The fiscal 2011 continuing resolution that was passed in April cut total spending by $40 billion, with $22 billion coming from construction accounts.  In the House funding for EPA was cut by a total of $1.5 billion for fiscal 2012, and more than $900 million of those cuts came out of wastewater and drinking water state revolving funds.

It is important to note that the caps only impact discretionary budget authority and will be felt in all federal construction programs in this category.  Construction programs funded from the Highway Trust Fund and the FAA Airport Improvement Program do not appear to be subject to these caps because these are trust fund programs which are considered a form of mandatory budget authority.  This does not in any way guarantee that these programs will escape cuts in 2012.  The current level of highway spending can not be sustained by the current highway trust fund revenue.

AGC supported this bill because of the prospect of a financial crisis or an increase in interest rates if Congress failed to act. Higher interest rates would have negative impacts on private construction (still about 60%) of the total construction spending annually.  The potential for a debt limit crisis to increase interest rates nationwide would also dampen the demand for construction services.  It would also increase the level of economic uncertainty that keeps owners from wanting to invest in new buildings.

AGC will spend August making the case for construction.  AGC will meet with the members of the Joint Committee and the standing committees of Congress that may be offering advice to the joint committee before October 14.  We will also be working to get the FAA authorization extended and get the highway reauthorization off the ground. We will be offering up ideas to increase efficiency and reduce costs while still delivering the projects the country needs.

For more information, please contact Jeff Shoaf at (202) 547-5013 or shoafj@agc.org. Return to Top

AGC Leads Coalition to Fights Big Cuts to GSA New Construction and Lease Programs
 

Now that the House is preparing to finalize an FY 2012 spending plan for the General Services Administration that eliminates funding for design and construction services and allocates only $280 million for repairs and alterations, AGC has been working with numerous partners in the construction and real estate industries to call on Congress to ensure sound funding for these programs. A letter, drafted by AGC and the Building Owners and Managers Association (BOMA) International and signed by twenty-five organizations and companies, was sent to Congress on Monday, August 1 and calls on them to restore funding for the agency to levels proposed by the Obama Administration. The reductions approved by the House Appropriations Committee come on the heels of the recent FY 2011 budget deal that cut the agency’s budget by $1.7 billion.  AGC will continue to press Congress to restore funding to GSA in the FY2012 appropriations bill.

For more information, please contact Marco Giamberardino at (703) 837-5376 or giamberm@agc.org. Return to Top

TRANSPORTATION
FAA Shutdown Continues
Bipartisan Deal Announced
 

With the debt ceiling debate over for now, all eyes have focused on the partial shutdown of the Federal Aviation Administration which is due to Congress’ failure to enact a 21st extension of the authorization prior to leaving for their August recess. 

Senate Majority Leader Harry Reid (D-NV) announced just this afternoon that a bipartisan compromise on an extension has been reached.  Details on the deal are not yet available and according to reports a deal could be finalized tomorrow.

The shutdown, which is now in its 13th day, is impacting AGC members throughout the country who work on projects funded by the Airport and Airway Trust Fund.  According to AGC estimates, this shutdown is impacting approximately $2.5 billion worth of airport construction projects and as many as 39,000 construction jobs.  Depending how long the shutdown lasts, up to 18,000 jobs in supplying industries and 57,000 throughout the economy are also in jeopardy.

The failure to pass an FAA reauthorization bill dates back to 2007 when the original bill expired.  Congress’ failure to pass a new authorization has resulted in 20 extensions over the past four years.  These extensions have been fairly routine until now, where a political impasse has led to the furlough of 4,000 FAA employees and halted construction projects throughout the country.

AGC has been at the forefront of trying to get Congress to resolve this issue and pass a multiyear authorization even though a deal has been announced advocacy needs to continue until the House and Senate pass an extension.  To see AGC’s efforts and to contact your legislator, click here.

For more information, please contact Sean O’Neill at (202) 547-8892 or oneills@agc.org. Return to Top

No Action on Highway Reauthorization Gas Tax Renewal Could Be a Potential Problem
 

Upon completion of the debt ceiling legislation, Congress adjourned for its summer recess without taking up long-term highway and transit reauthorization legislation. While both the House Transportation and Infrastructure Committee (T&I) and the Senate Environment and Public Works Committee (EPW) have released outlines of what will be included in their bills, neither has actually released legislative proposals. EPW Chair Barbara Boxer (D-CA) had hoped her committee would be able to mark up a bill prior to the recess, however, that did not happen. The primary reason for the delay is that the bipartisan leadership of the EPW Committee wants to do a two-year bill that will maintain current funding levels. To do this, additional Highway Trust Fund revenue must be found. The Republican leadership wants the funding identified before taking action on the bill. Senate Majority Leader Harry Reid (D-NV) said this week the Senate needs to work on reauthorization when it returns. Senator Reid said he has spoken with Senate Finance Committee Chair Max Baucus (D-MT), whose committee is responsible for identifying additional revenue sources, and they agree additional sources can be found.

Reauthorization will become an acute problem when Congress returns, because the latest short-term extension expires on September 30, 2011. Without additional revenue, the highway and transit programs are facing a cut of as much as 35 percent from current levels. In addition, authority for collecting the federal motor fuels tax also expires on September 30. Failure to act will result in the federal tax not being collected, further depleting the resources of the Highway Trust Fund.

You are strongly encouraged to use the August recess as an opportunity to contact both of your Senators and your Representatives to urge action on transportation reauthorization. Personal visits are the best way to communicate this message. In addition, visit AGC’s Legislation Action Center to send a letter to your Representatives.

For more information, please contact Brian Deery at (703) 837-5319 or deeryb@agc.org. Return to Top

PAC
AGC PAC Shows Support in Nevada-2 Special Election, Monitors Oregon-1
 

AGC members of the Nevada Chapter met, on July 28, with Mark Amodei, Republican nominee for Nevada’s second congressional district special election. Amodei is no stranger to the construction industry. During his sixteen-year tenure in the state legislature, he remained an industry ally with a receptive ear for construction policy issues.  As a strong show of support for his congressional bid, Chapter President Dave Backman, K. G. Walters Construction Co., Inc., presented Candidate Amodei with a $2,500 AGC PAC check.

Nevada-2 became vacant upon Governor Brian Sandoval’s (R) appointment of Rep. Dean Heller (R) to the U.S. Senate, as Sen. John Ensign (R) resigned in May. Amodei faces Democrat Kate Marshall, the current state treasurer, in the special election, which is set for September 13.

Additionally, AGC PAC continues to monitor developments in Oregon’s first congressional district. With Rep. David Wu’s (D) resignation August 3, Governor John Kitzhaber (D) set a special primary election for November 11, 2011 and a special general election for January 31, 2012. As the field unfolds, AGC PAC will keep close watch for a potential construction-friendly candidate worthy of support.

For additional information, please contact Jimmy Christianson at (202) 547-5013 or christiansonj@agc.org. Return to Top

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